United Arab Emirates Tourism Report Q4 2009

Tourism Overview After another year of strong growth in the number of foreign tourists to the United Arab Emirates (UAE) in 2008 (BMI estimates annual growth of nearly 10% to around 9.7mn arrivals), recent data indicate a much weaker picture. In Dubai – the key emirate for arrivals – figures for H109 show that almost 3.9mn tourists stayed at hotel establishments in Dubai, up by 5% year-on-year (y-o-y), but representing a marked slowdown compared with about 14% y-o-y growth in Q408. The better than expected outturn for tourist arrivals to Dubai is partly due to promotional campaigns in key source markets such as the UK, Germany, India, Russia, China, Japan and Gulf Cooperation Council (GCC) states. In Sharjah, by contrast, there was a sharp deterioration in the number of tourists staying at hotels in the first half of the year, down by 12% y-o-y. Hospitality The strong boom in the hospitality sector in the UAE of recent years has come to an end. Dubai and Abu Dhabi recorded falls in hotel occupancy rates during the first four months of 2009 of 16% and 7% y-o-y, respectively, while more recent data for the first six months of the year show further weakening in the sector in Sharjah. The total number of occupied room nights in Sharjah was down marginally in H109 compared with the H108, with overall occupancy rates at 64%. Forecast Scenario Taking on board the relatively modest growth in tourist arrivals to Dubai in H109 and very disappointing data on visitors to Sharjah over the same period, BMI maintains a rather poor outlook for the UAE tourism sector in the short term. However, based on more favourable data than expected from Dubai, we have edged up our forecast of negative growth in tourist arrivals to the UAE as a whole from -3% to -2% y-o-y in 2009. This scenario also underscores attempts by individual emirates to boost domestic tourism to compensate for the downturn in foreign visitor arrivals. Recovery in growth in arrivals is anticipated in 2010 and will pick up from 2011 (with stronger growth rates than our earlier forecasts). Air Arabia Sharjah-based Air Arabia reported robust results for Q209, with net profit up by 10% y-o-y to AED90mn (US$25mn). Passenger numbers in the first half of the year also rose healthily, by an annual 20%, to almost 2.0mn. In September 2009, Air Arabia and the Middle East’s largest travel and hospitality group, Travco Group, announced a joint venture to launch a new low-cost carrier based in Egypt. Air Arabia Egypt will serve European, African and Middle Eastern markets.